Is revenue reconciliation a scary concept, or does it sound like something only for accountants? It doesn’t have to be, and it can provide great benefits to your facility. Monthly revenue reconciliation is an important best practice to test the reasonableness of net revenues by payors that are reported on a facility’s financial statements each month.
If you’re using billing software, you may expect it to automatically record proper charges for room and board and ancillary services and contractual adjustments, based on rates that have been entered in your system. However, if rates aren’t input or updated correctly, or if the billing system’s mapping to the general ledger is incorrect, the net revenues on your financial statements could be misstated.
Some questions facilities might want to consider are:
- Do we have the current Medicare Part A Resource Utilization Group (RUG) rates and Medicare Part B rates entered in the billing system?
- Are the Medicaid daily payment rates current and do we have an effective process for updating them each time the rates change?
- Are private and semi-private room charges kept up to date?
- Do we have a solid understanding of our managed care contracts and payments? Are the services reimbursed at a flat rate or paid like Part A RUG rates?
Checking revenues for reasonableness monthly can help your facility identify issues and correct them to help avoid year-end surprises. In just a few minutes’ time, your facility can do a quick check to see if expectations and reality are in agreement.
We’ve provided a revenue reconciliation tool to help you with the calculation. You’ll just need to gather a few items from your records:
- Census, by payor
- Room rates
- Medicare Part A logs
- Managed care logs (if applicable)
- General ledger
To use this tool, you simply input your census days, rates by payor type, expected revenue from Medicare Part A and managed care logs and actual revenue and contractual adjustments from your general ledger. Then, compare the calculated rates for variances.
Medicare Part A
Is the calculated rate on the general ledger comparable to the calculated rate on the logs? You also can obtain a Provider Statistical and Reimbursement (PS&R) System report for the period and enter the same information to see how it compares to your records. If billing is up to date, the average rate should be comparable even if all days haven’t been paid. Check our website for an article on the PS&R and the PS&R Analytic Tool.
Is the average rate per the general ledger comparable to the Medicaid rate for the same time period?
Is the average rate per the general ledger comparable to the hospice rate for the same time period depending on the payor?
If you have flat-rate contracts, is the average rate per the general ledger comparable to the contract rate for the same time period? If you have contracts that pay based on RUG rates, is the average rate per the general ledger comparable to managed care logs for the same time period?
Is the average rate per the general ledger comparable to your set private and semi-private rates for the same time period?
If you’re finding differences in expected revenue and revenue recorded on the general ledger, start asking additional questions. Are the rates correct in your billing system? Are unexplained adjustments being posted, and if so, why? Are revenues booking in accordance with what the facility is getting paid? Most billing systems have various reporting options that give users the ability to run detailed revenue transaction reports, which include details of the charges booked, payments received and adjustments recorded. This can help you uncover and correct the cause of the variances.
Making revenue reconciliation a standard monthly process can save frustration at year-end by avoiding surprise adjustments and help appropriately state revenues on a facility’s financial statements.
For more information, contact Pam or your trusted BKD advisor.